Why Do Small Businesses Fail

smallbusiness Fail

Small businesses fail all the time. It is a sad reality of our times though thankfully it doesn’t serve as a deterrent to many new entrepreneurs. For customers, having to watch a small business that they have patronized for some time, go under is an emotional and sad affair. Here are a few reasons that lead to the downfall of most small businesses.

Operational costs shave profits down too much

Unlike larger businesses, small businesses have a smaller sum of money at their disposal that they need to distribute over operational costs, salaries, acquisition of new products etc. since bills for all of these need to be paid, small business owners often need to slim down their profits margins to sustain themselves. Over a period of time, very marginal profits make running a business very difficult which can prompt owners to just shut it down.

Business fails to meet customer demands

When a business becomes popular with customers, it needs to expand its operations. If it fails to do so, it runs the risk of sending customers away which leads to negative publicity. Some customers may go to other stores while others may simply not be tempted to return if a business doesn’t have enough time or product to give to a customer. Failing to expand at the right time and failing to meet business demands may decrease profits and prompt a business to close.

Customers get bigger discounts at larger businesses

Larger businesses have bigger resources at their disposal. This means that they can offer bigger discounts and more incentives to customers. In fact, large businesses are the biggest threat to the existence of small businesses that are run into the ground with financial problems that arise from trying to compete with a larger business.